Happy Debt Limit Day!

posted at 4:00 pm on May 16, 2011 by Ed Morrissey

Say, shouldn’t there be an official song for Debt Limit Day? I’m thinking Enough Is Enough, except that would mean I’d have to play a Barbra Streisand song. Today, the Treasury will hold a sale on bonds that will take the US to its statutory debt limit, beyond which we cannot borrow without a raise in the ceiling from Congress. ABC calls this D-Day:

First thing this week, the United States will have hit its $14.3 trillion congressionally-mandated borrowing limit and the federal government will be running on fumes.

While the treasury says it can continue funding Uncle Sam’s $3.8 trillion annual spending spree by tapping into what is effectively an emergency credit card — borrowing from government worker retirement funds and cutting off federally-backed state and local bond programs — many people are wondering what, if any, impact not extending the debt limit might have as the May 16 deadline comes and goes.

Survey says — not much! Treasury Secretary Tim Geithner has already assured bond markets that the US can meet its obligations for the next three months, and some believe that we don’t have to default at all. However, statutory spending will eventually force the federal government to do something to ensure proper payment on obligations. Even economists in ABC’s D-day story believe that the White House will cut a deal well before any default dates.

But what should that “something” be? Large majorities in several polls oppose any increase in the debt ceiling, at least not while the issue doesn’t appear to be critical. That will make it rather difficult to get Congressional approval on a ceiling hike — which puts deficit hawks in the driver’s seat. They will demand significant concessions from the White House before assuming an unpopular position on a debt-ceiling hike, and by significant, I mean something that will make a further hike unnecessary. It may be a spending cap, it may be entitlement reform, but whatever deal is made will almost certainly require both, either explicitly or as a consequence to agreed structural changes in spending.

But back to my first question. What should we be singing around the Debt Limit Day cake? And where in tarnation am I going to find 14.3 trillion candles?

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recent analysis by the Congressional Research Service concluding that the federal government would have to “eliminate all spending on discretionary programs, cut nearly 70% of outlays for mandatory programs, increase revenue collection by nearly two-thirds, or take some combination of those actions in the second half of FY2011 (April through September 30, 2011) in order to avoid increasing the debt limit.”

I thought interest on our debt was like ~200 billion dollars. I mean that’s a lot, but that makes it sound like they’d need 3-4 trillion. What’s up with that?

recent analysis by the Congressional Research Service concluding that the federal government would have to “eliminate all spending on discretionary programs, cut nearly 70% of outlays for mandatory programs, increase revenue collection by nearly two-thirds, or take some combination of those actions in the second half of FY2011 (April through September 30, 2011) in order to avoid increasing the debt limit.”

I thought interest on our debt was like ~200 billion dollars. I mean that’s a lot, but that makes it sound like they’d need 3-4 trillion. What’s up with that?

apollyonbob on May 16, 2011 at 4:08 PM

The deficit (yearly overspending of money we don’t have) is $1,645 billion. That would have to be cut from somewhere. After we get rid of that we start getting into what we have to cut from other programs.

I thought interest on our debt was like ~200 billion dollars. I mean that’s a lot, but that makes it sound like they’d need 3-4 trillion. What’s up with that?

apollyonbob on May 16, 2011 at 4:08 PM

The default would be on the treasury bonds being redeemed, along with the interest on immature bonds. The deficit number has nothing to do with that, other than reporting how much we’ll have to borrow to keep the government solvent.

In a few years, the interest on the debt will exceed $800 billion per year. That will be nearly 40% of GDP. Not to worry, thought. The economy will crash well before we get there.

But what should that “something” be? Large majorities in several polls oppose any increase in the debt ceiling, at least not while the issue doesn’t appear to be critical. That will make it rather difficult to get Congressional approval on a ceiling hike — which puts deficit hawks in the driver’s seat.

Nope.

I just attended a high-level White House Debt Ceiling strategy meeting – as a “fly on the wall” …

Here’s an excerpt …

Obama:“Damn – can’t believe my UNBELIEVABLE LUCK! First, I cut the House Republicans off from their Tea Party base when I snookered John Boehner into $39B in cuts – after he’d said ‘Read My Lips! $100B and not a penny less!!’ … then I wax UBL … and now I have a chance to ‘three-peat’ by drivning a bigger wedge between the Tea Party and the Republicans on the Debt Ceiling!!”

Bill Daley (CoS):“You da man! Home Bleed! Hell, the Republican leadership is so scared of hitting this debt ceiling they’ll cut any deal we throw at them! Whaddaya wanna do, Big Guy? Ask Boehner for his bottom line and then subtract 61% off the top of it like we did on the budget cuts?”

Obama:“Uhhh – no …. uhh … let’s play it cool Bill. Call up Boehner – and ACT REAL SCARED. Hehe … Maybe he’ll get excited and go out and make some more of those ‘Write this down’ and ‘Read My Lips’ statements to his conservative base. See – thats the key – we want the base to be real unhappy with him and the other Republicans when they cave to my awesomeness!”

Bill Daley:“Yeah Big Kahuna – and what’ll make this sweeter – is when Boehner leans on Michelle Bachmann and Allen West and the other Tea Party guys to support him – by appealing to their party loyalties and using some nice ‘united we stand – divided we fall’ rhetoric!! Funny as hell!!”

Obama:“HAHAHAHAHA! This is a GRAVY TRAIN that just won’t quit, Bill! These damn Republicans are so awesomely predictable!!”

Is intra-governmental holdings included in this limit? I still don’t get why we continue to pay interest on money we owe ourselves. The inflation already is accounted for when the money was borrowed (printed).

The national debt is real money, owed to real people by the U. S. government (that’s you and me). It is in the form of U. S. savings bonds, treasury bills, notes, and bonds, and a few other things. Most of it, about 75%, is owed to private individuals and organizations. Those organizations include banks, savings & loan associations, insurance companies, corporations, state & local governments, and foreign investors. Some is owed to various private pension funds, including labor union and corporate pension funds. About 25% of it is owed to other federal government entities. Some of the debt is probably owed to you, directly or indirectly.

We borrow more money. Every year, the U. S. government issues new bonds, bills, and notes, to finance the debt. When someone buys a Treasury bill, that person is loaning money to the government. The loan will be paid back, with interest of course.

Thriller by Michael Jackson
Summertime Blues by The Beach Boys
Eat the Rich by Aerosmith
Welcome to my Nightmare by Alice Cooper
We Didn’t Start the Fire by Billy Joel
Don’t Know What You’ve Got (’til it’s Gone) by Cinderella
High Enough by Damn Yankees
The Final Countdown by Europe
One Bourbon, One Scotch, and One Beer by George Thorogood
Big Goodbye by Great White
Point of No Return by Kansas
Road to Nowhere by Ozzy Osbourne